I was so disappointed when I saw Europe roll-back significantly on its ambition in relation to the Corporate Sustainability Reporting Directive (CSRD). In one fell swoop, the Commission delivered the news that the number of companies in scope for reporting would reduce by 80% and that there would be a two year delay and a revised, condensed set of reporting standards for those that remained in scope.
Despite similar disappointment echoing through the halls of social media (or at least the ones I hang out in), and the fact that this proposal still has to go through the European Parliament, there seems to be an air around the place that its adoption is a fait accompli.
Perhaps this is a reaction to events across the Atlantic, where sustainability has met a prohibition-esque wall in the form of its new sheriff. Or perhaps its because we can hear in the announcement the deep, familiar voice of Old Master Money, gently chiding us for getting carried away with ourselves when we always knew we were not really the ones in charge. That innate, ‘a priori’ voice that lets you think you are equal, until you need to be reminded that you’re not.
So, when faced with this news, how should companies respond? What should you, as a senior leader reading this post, do? I’ve seen a raft of advice encouraging companies not to give up on the good work they’ve done so far and I would echo that, but I would also say that this is an opportunity for reflection. It’s a fork in the road where you must purposively choose your path.
Are you happy to take the pass you’ve been given? Are you content to take risks with your business, especially when you can see how quickly the political tides can turn?
For me, the blind-spot in all of this, has been that the sustainability report itself has been touted as the be-all-and-end-all, when in fact reporting is only one output of corporate sustainability. It was never meant to be its outcome.
The outcome that sustainability reporting was instead meant to achieve, was to ensure companies had the governance structures, due diligence processes, tools and know-how in place to identify, assess, respond to and manage impacts, risks and opportunities on an ongoing basis.
Do threats like reputational damage resulting from company involvement in human rights abuse, rising energy costs, stranded assets or supply chain issues with scarce natural resources go away, just because our European teacher told the class we don’t have to do our homework?
Does not thinking about something make it disappear?
It will be really interesting over the next few months to see how companies respond to this news. We know sustainability has been on everyone’s radar since 2022 with the adoption of CSRD, but how quickly will it drop off? I imagine shareholders and stakeholders will have a bigger part to play in setting the sustainability and responsible business conduct (RBC) agenda for companies through more persistent requests for disclosure and transparency. Time will tell.
In the meantime, the time has come for you to make a decision. Will your company follow the herd? Or will you take accountability for your company’s impact and risk profile?
The choice is yours.
